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One co-op dying as another feels better

By JOHN DALEY, Colorado Public Radio and JEFF COHEN, WNPR

via Kaiser Health News

Thousands of Americans are again searching for health insurance after losing it for 2016. That’s because health cooperatives — large, low-cost insurers set up as part of  the Affordable Care Act — are folding in a dozen states.

The failure of Colorado’s co-op has hit Rick and Letha Heitman hard. They are customers of the Colorado HealthOP, which is closing up shop at the end of the year. The couple, who own a contracting business, say the co-op proved to be a life-saver when Rick was diagnosed with aggressive prostate cancer last spring.

“I owe them for taking care of me. They helped me at a time when I needed it a lot,” he says.

About 80,000 people are in the same boat as the Heitmans, on the hunt for new insurance plans on Colorado’s exchange. HealthOP’s CEO Julia Hutchins says the co-op got walloped by the equivalent of a fast-moving tornado after the federal government said it wouldn’t be paying co-ops millions in subsidies they had expected.

“We were really blindsided by that,” she says. “We felt like we’d done our part in helping serve individuals who really need insurance and now we’re the one left holding the bag.”

And, she insists the co-op was on track to be profitable. Colorado HealthOp is one of 23 nationally in 22 states that opened after the ACA was enacted. The startups were supposed to shake up the traditional marketplace by being member-owned and nonprofit, but it was tough to figure out how much to charge. They needed to estimate how much medical care their customers would use, and they had to do that without data from previous years and without the cushion of a reserve fund. Established insurers can use reserves and experience to recover if they underestimate premium prices in a given year.


Many co-op plans were priced low, and customers poured in. But these new customers had high health costs, so the co-ops had to start paying a lot of bills. The math didn’t add up. On top of that, they were counting on a variety of funding streams from the federal government, and not all of them materialized.

Linda Gorman, with the Independence Institute, a conservative-leaning Colorado think tank, says the new co-ops were in over their heads.

“You shouldn’t go into business counting on federal subsidies,” she says. “The notion that you should beat up on for-profit entities and then form these nonprofits and everything will be magically OK is unfortunate to begin with. We’ve wasted a lot of taxpayer money on that.”

But the HealthOP’s senior IT manager Helen Hadji, a Republican, blames conservatives in Congress for not authorizing the money needed to keep the cooperatives afloat.

“This is a federal failure,” she says. “This is all a political battle to dismantle Obamacare.”

Colorado’s co-op captured 40 percent of the individual market on the state’s exchange. Now as customers, like the Heitmans, hunt for new insurance, they are finding higher prices: They paid about $500 a month last year. Next year, it could be double or triple that.

“You know, that’s a big ‘owee!’” says Letha Heitman.

But it’s the price they’ll pay to keep Rick with the physicians who are treating his cancer.

In Connecticut, the opposite story is playing out. If Colorado saw an early surge in membership because of low prices, Connecticut’s co-op nearly priced itself out of the market in its first year. With rates much higher than its competitors, HealthyCT only got 3 percent of the state’s business under the Affordable Care Act.

“In that first year, the reason we had such low market share was that consumers — new to the industry, new to insurance — most of those individuals bought on price,” says Ken Lalime, who runs the co-op.

And, he says, starting it was hard.

“Nobody’s built a new insurance company in the state of Connecticut in 30 years,” he says. “There’s no book that you pull off the shelf and say, ‘Let’s go do this.’”

Lalime faced the same problem as insurers across the country: He didn’t know who his customers would be, he didn’t know whether they’d be sick or healthy, and he didn’t know how much to charge. It turns out he ended up charging too much.

But even though that meant relatively few signups in year one, the slow ramp-up actually helped. He didn’t have a huge number of claims to pay right out of the gate, and the ones he did pay didn’t break the bank.

“Hindsight, yes, that didn’t hurt us. To be able to take it slowly,” he says.

In year two, he had more competitive average premiums — and his company went from 3 percent market share to 18 percent. For 2016, HealthyCT and the state — after some back and forth — settled on a 7 percent premium hike for customers.

Paul Lombardo is an actuary for the state. He says that bouncing around is an indicator that setting premiums under the Affordable Care Act is still a bit of a gamble. That’s in part because there’s still no good data. So few people signed up with HealthyCT in the beginning that they didn’t have enough information to help set 2016 premiums.

“There wasn’t a lot of data to say, OK, we can use 2014 experience to project forward,” Lombardo says.

For now, at least, Lombardo says HealthyCT is holding its own.

“They’re in good standing,” he says. “The premium we think that we’re setting for 2016 — albeit a little bit higher than they wanted it to be on the revision — is appropriate.”

Enrollment for health insurance in the co-ops runs through Jan. 31 with just 11 of the original 23 co-ops still in business.

This story is part of a reporting partnership with NPR, Colorado Public Radio, WNPR and Kaiser Health News.

‘Risk-corridor’ woes threaten more than co-ops


It looked safe but wasn’t.

Shortfalls in the Feds’ “risk-corridor” program, meant to cut the financial risk of health plans on Affordable Care Act insurance exchanges by collecting funds from insurers doing a better exchange business and sharing the money with less successful ones, is not only famously hurting co-ops created under the ACA.

The government has said that it could pay  only a small portion of what it owed in risk-corridor program payments.

But while co-ops have received most of the publicity about risk-corridor woes, small  plans of all types are likely to face losses, Colorado HealthOP CEO Julia Hutchins told LifeHealthPro, linked here.

An example is a provider-owned health maintenance organization WINhealth, which has said it will  quit Wyoming’s exchange in 2016 in part because of the uncertain status of its risk-corridor payments, LifeHealthPro reported.

Another example: When Pittsburgh-based Highmark Health announced losses in April, it cited negative results from selling Affordable Care Act health plans and uncertainty about the collectability of risk-corridor payments. So — not being confident about  recouping the $155 million it was owed through the program — it took an “appropriately conservative accounting approach” concerning the payments.


Colo. co-op grabs big market share, but….


The Denver Post reports that “aggressive price cut by Colorado’s nonprofit health insurance cooperative this year led to it capturing the biggest market share of the state exchange….”

But, “A similar co-op serving Iowa and Nebraska was shut down by regulators in January after heavy losses, and the Colorado HealthOP’s losses were even greater when compared to its remaining funds, according to one analysis report.”

“In the second year of the state exchanges, the Colorado edition of the federally created {under the Affordable Care Act} Consumer Operated and Oriented Plans, or CO-OPs, upended the local marketplace by undercutting other plans’ premiums and pushing down federal subsidies available on the exchange.

“Colorado HealthOP, one of 23 CO-OPs nationwide, reduced premiums on its middle-tier, or silver, plans by an average of 10 percent. Its customer count shot up from about 14,200 in late 2014 to about 75,000 this enrollment period.”

If such co-ops can get their pricing right, they could surge around America, acting as a variant of the “public option” that polls suggested  that most Americans wanted  during the debate over the Affordable Care Act but insurance company’ lobbyists stopped the Obama administration and the then-Democratic-controlled Congress from including in the ACA.

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